Alyson Miller is a CPA who provides specialized accounting and tax services to music and entertainment clients.  She is the founder of Alyson Miller, CPA PLLC a rock and roll accounting, tax, and business management firm. She has years of music business experience working for both independent and internationally recognized artist and songwriters, record labels, publishing companies and music distributors.  

Musicians can save themselves some money and reduce their tax bill if they know what to look for when it comes to filing taxes.   There are many deductions that are specific to being a self-employed musician. 

If you are self-employed (i.e., you don’t receive a W-2 from an employer) you will file your income and allowable expenses on a Schedule C as an attachment to your 1040.  The net of the Schedule C is then reported on page 1 or you 1040. 

Always keep receipts for everything along with other documentation that you may have such as tour schedules. Here is a list and brief description of the typical allowable expenses.

Travel Expenses

The location has to be far enough away that is it inconvenient to return home otherwise expenses are considered commuting expenses and they are not deductible. 

Allowable expenses include:

• Hotels
• Airfare
• Phone calls to home
• Rehearsal space rental
• Tips
• Local transportation like taxis at your destination

Meals

• Meals associated with overnight travel
• Meal expenses incurred while discussing or conducting business

You are only allowed a deduction for 50% of the meal costs and the IRS requires a receipt and documentation on who, what, where, and why you incurred the meal expense.

Equipment

• All equipment (guitars, amp, strings, etc.)
• Repairs and maintenance on equipment

Any item that generally costs more than $500 is depreciated over 5 years.  What this means is that you can take one-fifth of the costs as an expense each year for 5 years.  You may be able to take a 179 deduction which means you can take the entire cost as an expense in the year you purchase the item.

Vehicle Expenses

There are two methods allowed for vehicle expenses.  You can choose one or calculate both and choose the one that gives you the biggest deduction.

Method 1 – keep actual receipts for:

• Gas
• Repairs & maintenance
• Insurance
• Property Tax

The IRS also allows a depreciation deduction for your vehicle under this method.

Method 2

• Keep mileage log of every mile traveled

• Use standard mileage deduction for each mile traveled (55 cents for 2009; 50 cents for 2010)

If you have a room in your home used exclusively for your business such as a studio you may be able to deduct it.  You can take a percentage of the square footage and apply it to:

• Rent
• Mortgage Interest
• Utilities
• Property Taxes

Health Insurance

• Premiums that you pay as a self employed musician are fully deductible on the front page of the 1040.

Other Items

• CD’s and music downloads
• Concert tickets
• Music publications
• Wardrobe

Don’t get greedy with these items!  Wardrobe must be used exclusively on stage.

Always consult your tax professional about your individual situation.  One size does not fit all so finding a music business accountant is always preferable. 

Alyson Miller is a CPA who provides specialized accounting and tax services to music and entertainment clients.  She is the founder of Alyson Miller, CPA PLLC a rock and roll accounting, tax, and business management firm. She has years of music business experience working for both independent and internationally recognized artist and songwriters, record labels, publishing companies and music distributors.  

As an indie artist you have no job security, no constant paycheck and no retirement plan.  You might not be able to do much about the first two but you can definitely do something about the last, the retirement plan.  As a self employed musician you can invest in your future and save on your tax bill all at the same time.

One of the best options for the self employed is the SEP-IRA (simplified employee pension-individual retirement plan).  Most likely you will be filing a Schedule C along with your 1040.  If that’s the case, you can put in as little as you like, up to 20% of your net Schedule C (maximum of $49,000 for 2009).  An advantage to the plan is that you can decide each year whether or not to contribute unlike other plans that require you to make contributions each year.

Another advantage to a SEP Plan is that they are easy to setup and administer.  It can be as easy as making a phone call to your local banker.  The costs for setting up and maintaining the plan are quite low in comparison to other plans. 

The contribution you make can really save you on your taxes too.  The amount contributed gets subtracted from your gross income as long as the contribution is made before the tax deadline (April 15^th or October 15^th if you file an extension). 

Lastly, always contact your tax advisor about making a contribution to any retirement plan. It’s always best to let them do the contribution calculation but consider the SEP as an option no matter how much or little money you make.  Even the smallest amounts saved or contributed can really make a big difference to your retirement future. 

Alyson Miller is a CPA who provides specialized accounting and tax services to music and entertainment clients. She is the founder of Alyson Miller, CPA PLLC a rock and roll accounting, tax, and business management firm. She has years of music business experience working for both independent and internationally recognized artist and songwriters, record labels, publishing companies and music distributors.

If you’re in charge of a band and you hire musicians you need to be aware of the tax filing requirements for Form 1099-MISC. The filing deadline for the form is quickly approaching and there can be penalties if you don’t file.

The forms must be postmarked by January 31^st. Copies of the forms and a transmittal (Form 1096) must be mailed to the IRS by February 28^th.

So what is a 1099-MISC?

Form 1099-MISC is a form required by the IRS to report payments to independent contractors, such as band members that are not paid through payroll. A form must be prepared for anyone that you paid at least $600 or more in a calendar year. If the payment was made to someone who is not self-employed you do not need to prepare a form for them.

How do you prepare the form and what information is required?

Generally payments for services to band members, commissions to your manager or any other independent contractors are entered in Box 7 on the form. If you paid rent to anyone such as space rent or equipment rent the amount paid goes in Box 1. If you paid your attorney these payments would go in Box 7.

If your band is organized as a partnership or corporation a Form 1099-MISC is not required for payments made to band members. These payments are reported on a Form K-1.

You will also need the name, address, and social security number for each form. One good practice is to have everyone you pay fill out a W-9 form. The W-9 will provide you with all of the information that need for the 1099-MISC. So, before handing someone a check you should hand them a W-9 first. Have them fill it out and keep it on file.

If you don’t have the information on file it’s your responsibility to gather it. This can be a difficult task if for example your drummer quit in the middle of the year and you’re no longer in contact with him.

Where can you get a W-9?

It’s a simple form that you can get in pdf format at www.irs.gov/pub/irs-pdf/fw9.pdf. The information on this form can protect you in many ways and it saves you the hassle of tracking down the information after someone is long gone.

You’ve received some 1099’s so what do you do with them?

Venues that paid you $600 or more should send you a 1099-MISC. The 1099’s have been reported to the IRS so make sure that the information on the form is correct, especially the amount and social security number. If any of this information is incorrect contact the payer and have them reissue it. Be sure to report all income that you receive even if you don’t get a 1099.

Keep the forms that you receive to document the amounts reported on your return. They do not need to be filed with your return.

If you find the task of preparing the 1099-MISC difficult your tax preparer can complete these forms for you. Always contact your tax advisor with specific questions or advise.